Berenberg sees further upside at GSK despite recent rally

Shares in biopharma giant GSK were in the red on Wednesday, pulling back after a strong performance so far this year, but broker Berenberg still sees further upside, reiterating a 'buy' rating on the stock.

In the first quarter alone, GSK shares rose 18% before retreating slightly in the past few days to trade at the 1,645p mark by 1052 BST on Wednesday, down 1% on the day.

But Berenberg has maintained its 1,820p target price, saying that the stock's valuation is still "compelling" compared with the wider sector, even when including a potential £2.7bn liability related to its ongoing litigation surrounding discontinued heartburn treatment Zantac in the US.

"GSK trades on 9.7x 2025 adjusted earnings versus global peers on 16.8x. On EV/NPV (including a £2.7bn Zantac liability), GSK trades at a c26% discount to global peers (0.78x versus 1.05x)," the broker said.

Following GSK's annual report last month, Berenberg notes that the company has had a "strong start to the year, both in terms of delivery and share price performance. Clear messaging on long-term targets and delivery in the interim is helping to build a more constructive dialogue with investors."

It added: "Nonetheless, GSK still trades c25% below the value of its marketed assets and on the lowest [price-to-earnings ratio] in European pharma."